The Big Thing Clients Don't Get About Social Security Spousal Benefits

Assumption: Tom plans to wait until 70 to claim maximum benefits. His lower-earning spouse, Pat, does not have 40 credits, so will get 50% of his maximum benefit payment.

Reality: Pat may get 50% of Tom’s PIA, but not 50% of his maximum benefit.

Tom’s PIA is $3,000, his maximum benefit is $3,720.
Pat’s dependent spousal benefit is $1,500 if claiming at full retirement age, not $1,860.

Assumption: As the lower-earning spouse, Sam thinks she will get her own benefit plus half of her spouse Chris’ benefit.

Reality: Sam will get a combined benefit if her own PIA is less than half of Chris’:

Sam’s PIA = $900
Chris’ PIA = $3,000

Sam’s maximum benefit at her full retirement age is $1,500: $900 on her work record + $600 spousal top-up. She does not get her $900 + $1,500 (half of Chris’).

Furthermore, Sam would get $0 in spousal benefits if her own PIA is greater than 50% of Chris’ PIA:

Sam’s PIA = $2,000
Chris’ PIA = $3,000

Sam’s payment will be the larger between a spousal benefit ($1,500) and her own benefit ($2,000). Thus, Sam will only receive her own benefit when she claims.

Sam can’t claim her spousal portion first, then claim her own. When she files, it’s for all eligible benefits.

There can be a timing issue when the top-up is available. Spousal benefits are a “subset” of a worker’s benefits. Until the worker claims, the spouse cannot receive spousal benefits but can receive their own.

A Spousal Benefit Is Simply a Consideration

Help clients understand the difference between “spousal” benefits and being a “spouse.” Connecting the dots about their various benefits can reduce confusion and frustration.

Many client couples today have a lower earner and a higher earner, but without enough difference to trigger a spousal benefit. With the restricted application doors just about closed, no one chooses between their retirement benefit options. And spousal benefits are always based on the higher earner’s PIA.

Marcia Mantell is the founder and president of Mantell Retirement Consulting Inc., a retirement business and education company supporting the financial services industry, advisors and their clients. She is author of “What’s the Deal with Retirement Planning for Women?,” “What’s the Deal with Social Security for Women?,” “Cookin’ Up Your Retirement Plan,” and blogs at BoomerRetirementBriefs.com.